Overhead rate & allocation per unit/hour. The Overhead Cost Calculator takes total overhead for the period, direct labour cost, direct labour hours, units produced and returns overhead rate (share of direct labour cost) plus overhead per direct labour hour, overhead per unit. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Margins tell you where the money goes between revenue and profit. Track each margin over time and against similar businesses; a falling margin while revenue grows is the signal to investigate. Use the worked example below to check the maths against your own figures.
How the Overhead Cost Calculator works
Overheads have to be loaded onto products or jobs somehow; the three allocation bases here are the common ones. Pick the one that best tracks what actually drives your overhead.
Worked example
With the example values (total overhead for the period of $240,000, direct labour cost of $480,000, direct labour hours of 12000 hours, units produced of 60000), the overhead rate (share of direct labour cost) is 50%; overhead per direct labour hour $20.00, overhead per unit $4.00. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is overhead rate (share of direct labour cost) calculated?
overhead rate = overhead ÷ direct labour cost; per hour = overhead ÷ labour hours; per unit = overhead ÷ units.
Which figures do I need?
Total overhead for the period, direct labour cost, direct labour hours, units produced. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
What is a good margin?
It depends on the industry: grocery and distribution run on low single-digit net margins, software and services on 20% or more. Compare with similar businesses and watch your own trend.
